The oil price war has reached the gates — specifically, the refinery gates. Expect casualties.
Wednesday's release of U.S. oil inventory and demand numbers was noted chiefly for the jump of eight million barrels in crude stocks last week, more than double the Bloomberg analyst consensus forecast. The more insidious threat, though, was in the demand data.
Gasoline makes up about half of U.S. oil consumption. Luckily for an otherwise suffering industry, it tends to respond well to low prices. This summer, gasoline consumption hit its highest level since those far-off, pre-crisis days of 2007, based on the four-week moving average.
And that did wonders for gasoline prices. The price of the main unfinished gasoline blending component — which goes by the ungainly name of reformulated blendstock for oxygenate blending, or RBOB — had gained 50 percent by the middle of June, at the height of driving season. As the chart below shows, that helped pump some life back into crude oil prices, too.
Now summer is over. As the first chart shows, on a four-week average basis, gasoline consumption is down by about 440,000 barrels a day since the end of August. Americans are still burning 3.1 percent more gasoline than they were a year ago, lending support to the market. But the rate of change is dropping: Back in July and August, those year-over-year change percentages began with a 4, 5, or 6.
That slowdown can also be seen in the second chart: Since the end of August, the RBOB price is down 30 percent, while crude oil is off by just a few percentage points.
